SpaceX has moved to absorb Elon Musk’s artificial intelligence start-up xAI, bringing the smaller company and its Grok chatbot under the aerospace firm’s control. The deal continues Musk’s broader effort to align his technology businesses more closely, linking artificial intelligence with space launch systems and satellite infrastructure. The merger would allow closer coordination between AI development, space-based communications, and satellite networks. Elon Musk believes today’s AI is about to hit a wall on Earth. Analysts cited by the BBC estimate xAI’s value at around $125bn, while SpaceX is valued at roughly $1tn, reinforcing its position as the world’s most valuable private company.
Elon Musk believes that Earth can support AI today, but not at the scale that is coming
Here’s what he means: right now, AI runs on enormous data centers that consume vast amounts of electricity and water for cooling. As AI models grow larger and more widely used, their energy demand rises very fast. Musk’s view is that if AI keeps scaling the way it has been, terrestrial power grids will struggle to keep up without driving up energy costs, straining infrastructure, or creating environmental and political pushback.He is not saying Earth is “running out” of energy. The planet receives plenty of energy from the Sun. The problem, in his framing, is how efficiently we can capture, distribute, and cool that energy on the ground, and how quickly we can expand those systems.Musk’s argument is simple: space has one thing Earth struggles to provide at scale, steady energy. In orbit, satellites can receive sunlight almost all the time. There is no weather, no night cycle, and no need for large cooling systems. The idea is to place AI computing hardware directly in space, powered by solar energy.
Elon Musk confirms ‘SpaceX and xAI are now one company’. (Image Source – X/ Elon Musk)
Within 3 years running AI will be cheaper in space than on EarthMusk claims that, within 2 to 3 years, running AI in space could become cheaper than doing it on Earth. If that happens, companies could train larger AI systems faster, without being limited by land, power grids, or cooling infrastructure.The longer-term vision goes much further. Musk imagines using the Moon to manufacture satellites using local materials, avoiding the cost of launching everything from Earth. Those satellites could then be sent deeper into space, tapping into far more solar energy than humanity currently uses.At its core, the idea is about energy and scale. Earth limits how big AI can grow. Space, in theory, does not. Whether it works in practice remains uncertain, but that is the reasoning behind putting AI data centres beyond the planet.